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California Health Care Reform and the Inevitable ERISA Challenge

Few were surprised when a Federal Court struck down San Francisco’s Health Security Ordinance on ERISA grounds. There were elements of the city’s ordinance that seemed to invite a suit and to have been drafted on shaky legal grounds. What’s interesting is whether the Health Care Security and Cost Reduction Act (Assembly Bill X1-1), passed earlier this month by the state Assembly and scheduled for a Senate Health Committee hearing on January 16th, will fare any better. University of Mississippi law professor Paul Secunda, writing in the Workplace Prof Blog and Anthony Wright in a December 27th posting on the Health Access blog think it will. Chris Reed of the Union-Tribune and Daniel Weintraub at the Sacramento Bee think it won’t.

What’s important to keep in mind is that previous ERISA decisions by Circuit Courts, such as that of the Fourth Circuit when it overturned a Maryland law aimed at Walmart, are not controlling in California. A decision from the Ninth Circuit will be. That’s just the way Federal Appeals Court decisions work — they’re only controlling in Federal Courts in the states comprising that circuit.

ERISA has been the bane of state and local health care reform efforts for years and is one of the reasons national health care reform is likely to be required. While the authors of ABX1-1 have taken great care to avoid running afoul of ERISA, that’s a far from easy task. Just ask the San Francisco Board of Supervisors. Better still, ask the Ninth Circuit Court of Appeals.

Actually, I was aware of that decision — I had read about it in your excellent posts on the subject. Not having read the decision, however, I’m not in position to conclude it’s controlling in this situation. That’s a decision the Ninth Circuit itself will make. But thanks for the comment Mr. Reed. I’ve enjoyed reading your posts on the topic.

Mr. Katz appears unaware of the fact that the 9th circuit court has already issued one of the landmark ERISA rulings of the past 30 years, in the Agsalud vs. Standard Oil of California case. In 1980, the 9th backed a district court ruling scrapping the state of Hawaii’s employer mandate. The ruling was upheld without comment by the Supreme Court. Hawaii subsequently asked for and received a congressional exemption for its mandate. The author of the decision, Mary M. Schroeder, was until last month the chief judge of the 9th circuit. She was appointed by a Democrat (Jimmy Carter).